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Weekly Options – Benefits

Four Benefits That You Get Out of Trading Weekly Options

Many traders actually love the concept of weekly options as compared to the monthly options. But, what is it that they love about them?

What Are Weekly Options?

If you are wondering what weekly options are then it is best if we define it first. So, what are weekly options?

Weekly options are commonly known as “weeklys.” These are options that are listed that have around a week before it expires. This is different from the traditional options because the traditional ones have the entire month or even an entire year before it expires. The series for this type of options are listed every Thursday and they expire on the Friday of the following week. However, there will be no weeklys that are going to be listed that would expire on the same expiration week as that of the standard options which is on the third Friday for each month.

Generally, weekly options are the same with standard options when it comes to contract specification. They also offer the same two sided quotes that are continuous just like that of standard options. They also carry the same rights and obligations as standard calls and puts have but with shorter time frame for expiration.

Trading Weekly Options

Trading weekly options has become very popular among investors these days. There are four advantages that you will get out of trading them and this may be the reason why many investors are opting to trade them instead of the monthly options.

Low Price Trades. You can trade weekly options at low prices. The concept here is not about the theoretical value but the real thing. Generally, these weekly options cost far less than the monthly options. They actually have lower price because of the fact that they have shorter expiration time frame. Another thing is that traders will only have less time for a stock or index to move in the money. There may be traders who do not understand how quick it would be for the out of the money options can fade. As for this type of traders, they consider weeklys as a way to lose money quickly. However, for the traders who are expert in knowing how to actually hedge the position of these weekly options, they actually consider that weekly options are representations of an extra opportunity to gain profit.

Rapid Delta Swings. Another advantage that you will get from trading weeklys is the fact that weeklys undergo rapid delta swings. However, weekly options are not advisable for those traders who are quite conservative when it comes to trading because of the rapid delta swings. Weeklys are considered great tools for traders who love to gamble. The reason for this is that with long term options a slow delta swing is experienced. This is because the gamma is small and also because of the fact that the prices of the options does not dramatically change when the options move from out of the money position to an in the money position. When weklys are considered, the gamma is unstable because there is just little time in a weekly option’s life. The options can definitely experience a dramatic change from an out of the money position to an in the money position. The price of the option also changes dramatically and this is great for those traders who love to gamble.

Better Play. Weeklys also offer a better way where they can play the news. By the time that there are companies who are about to announce their earnings, traders will begin to speculate and anticipate the likelihood of the moves that are going to take place in the stock price. Before, options tend to become rather pricey before the news because of the fact that there are actually more buyers than that of the sellers. This can be true when weeklys are considered. However, with weeklys the price increase is not that much as compared to the longer term options. They are just priced at a certain amount that traders who loves to take risks are willing to pay. Once the news is released, the resulting drop will have little effect on the weeklys. Weeklys have a simple concept which are winning or losing. With long term options, their value decreases. But with weeklys’ short expiration time frames, the results will just be your options will be worthless or it moves in the money.

Most Actively Traded Stocks. You will not have a hard time looking for weeklys because they are rather listed on the most actively traded stocks. The list of the weekly options that are available changes every week. You check out the list at the website of CBOE. CBOE are listing options that will attract a large trading volume. Basically, stocks with high volume are on the list

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Weekly Options – Credit Spreads

A notable system for Weekly Options market players who guess that the underlying instrument they are working with will be range bound for the next 2 to 4 days or so of time is the butterfly strategy.

This positive theta option technique creates winnings when the weekly options that are being traded stay within a contained section on the graph or ends up on expiration day at or near the short strikes of the position.

Weekly Options Verticals – Example

These positions can render fast gains for the option trader due to the fact that the short strikes of the spread (the strikes which are sold) create so much premium into the traders account for the reason that they are being sold ‘at the money’ – which are the strikes that have the largest amount of time premium in them. Again, these options that are picked exactly where the underlying trading vehicle is traded at normally bestow the most amount of option premium useable.

Weekly Options – Butterfly

Whilst you can encounter a lot of mutations of the butterfly spread, the 2 most discussed are the regular butterfly which is placed for a debit, and then there’s the iron butterfly, which is placed for a credit. It is true that these two independent versions of the butterfly spread are emphatically different, if you would look at the risk graph of one and then compare it to the other, they would seem to be exactly the same, and they actually perform the same as well.

The weekly options butterfly strategy is a ‘delta neutral’ options trade, meaning that investors who use this strategy either don’t have an view on marketplace direction or trust that the underlying being traded will continue in its regular area on the price chart for the remainder of the trade.

When utilized right, Weekly Options can be an hugely profit making, low stress, and somewhat satisfactory trade that requires very little time and effort having to manage.

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An interesting thing about the new weekly options that are available for trading is that many times the premium that is available in these options add up to MORE than what is typically found in the standard monthly options.

For example, in the monthlies, 30 days out from expiration one might find 1.oo of premium available for a particular option. But in the four weeklys – one could find a total of 1.50 or even up to 2.00 if you were to add each of the four week premiums together going into expiration day.

So obviously it makes sense to sell the four weeklys – one per week – rather than sell the standard monthly 30 days out and wait around until expiration day. It’s possible to double the money you would have brought in had you just stuck with the weeklys.

The other benefit to this is that the weeklys allow you to maneuver around news and earnings reports – as well as it allows you to only have to be right about the market and/or stock you are trading for a shorter period of time – a week.

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A nice strategy for derivative traders of Weekly Options who feel the underlying stock they’re working with will probably be range bound for the next two, three, or 4 days of time or so is the butterfly spread .

This theta positive option trading position creates profits when the stock or index that is getting traded remains within a contained section on the graph or ends up on weekly options expiration day at or near the sold strikes of this trade.

Here is an representation of a weekly options butterfly spread position:

These positions can give speedy gains for the investor due to the fact that the short strikes of the spread (the strikes which are sold) deliver so much premium into the traders account for the reason that they are being sold ‘at the money’ – which are the strikes that have the biggest amount of time premium in them. Again, these options that are picked exactly where the underlying stock is traded at commonly bestow the most amount of option premium usable.

Though you will encounter countless mutations of the butterfly scheme, the two most repeated are the standard butterfly spread which is set on for a debit, as well as the iron butterfly, which is put on for a credit. Although these are two unlike mutations of the butterfly spread, when you compare them next to each other on a a risk graph, they come across identical. While the trade is in progress, they act comparable too. With both mutations of this system, it will be the short strikes, or the strikes that are sold at the money, that provide the trader with gains.

The weekly options butterfly technique is a ‘delta neutral’ options trade, meaning that market players who utilize this methodolgy either don’t have an persuasion on marketplace direction or believe that the underlying being traded will stay in its regular spot on the price chart for the remainder of the trade.

When used accurately, the butterfly spread can be an super profitable, low stress, and pleasurable way to trade Weekly Options that requires very little time having to manage.